In next downturn, Fed may opt for quick, strong action

Although the review has focused on how the Fed should pursue its 2% inflation target, downside risks to an otherwise healthy economy have raised the specter that policymakers may need to introduce unconventional policies sooner rather than later.

NEW YORK/SAN FRANCISCO: In the next economic downturn, the Federal Reserve and other central banks may need to roll out their big guns sooner and use them more aggressively, or risk getting mired in growth-sapping deflation or worse.

That was the argument laid out Friday by a group of veteran monetary policy analysts and Federal Reserve Governor Lael Brainard, who called for using now-familiar policy tools like forward guidance more forcefully, and adopt new ones like capping interest rates to bolster the Fed's clout.